- Trading a range of digital assets using blockchain technology can often be complicated due to illiquid markets.
- “The idea behind the platform is to bring crypto markets closer to large institutional investors and traders while bringing additional liquidity to previously illiquid assets,” said Luka Gubo – Blocktrade CEO – in an exclusive interview with BitStarz News.
- Blocktrade is helping to revolutionize the way digital assets are traded by offering users a carefully developed and technologically advanced platform.
Trading digital assets is still a tricky business, as there aren’t too many platforms around that are fully regulated and offer trading to retail and institutional clients. Blocktrade bridges this divide, allowing traders to tokenize virtually any asset, before trading it through its lightning-fast exchange platform.
Alex Meears recently spoke with Luka Gubo – Blocktrade CEO – to find out more about the platform and its revolutionary capabilities.
AM: What inspired you to create Blocktrade?
LG: We saw a huge opportunity in building a fully regulated, institutional-friendly crypto asset exchange. The idea behind the platform is to bring crypto markets closer to large institutional investors and traders, while bringing additional liquidity to previously illiquid assets – such as start-ups, real estate, crypto, and VC funds. All of these types of assets could be tokenized and put on a blockchain.
Given my background and the feedback I have received from speaking to dozens of large institutions, it was quite easy for me to identify what was missing in the crypto markets. The industry was missing a regulated trading venue with the highest levels of security, reliable and fast connectivity, fast performance, institutional-grade clearing, and settlement, and with new asset classes listed – such as cryptocurrencies, security tokens and other tokenized assets – that also have a regulated custodian.
We are solving the problem that regulated investment firms have with accessing the crypto markets by creating a regulated trading venue with a level playfield, full compliance with MiFID II, easy connectivity, and a reliable t+0 settlement system, where crypto assets are listed and traded.
AM: The platform boasts over 1 million trades per second – is that its maximum capability, or the level it is currently operating at? Is there a way for this to be externally verified?
LG: A matching engine that we developed can match a couple of millions of trades per second with really low internal latencies, but that part is not as important. Usually, matching engines – if developed properly – are not the cause for a bottleneck in the exchange’s IT system. In fact, how you handle API calls and how you perform additional checks on all orders is as much as – or even more – important than a fast matching engine with a fast database which has to guarantee consistency and reliability.
Our Omega architecture that includes the exchange – order book, matching engine, transaction reporting system, back office system, API connectivity, and market surveillance – order management system – creation and transition of orders to the exchange, checking balances, open orders, and available access to specific markets – and settlement – custody, clearing and settlement of assets – is partially used in our cryptocurrency exchange, but will be fully developed for our security token exchange which will launch after the regulatory approval.
Once we receive regulatory approval, other parts of the exchange will be optimized for both high throughput and low latency – not only the matching engine.
AM: What made you choose Lichtenstein as the location to register the company, why not a more crypto-friendly jurisdiction such as Malta or Gibraltar?
LG: Blocktrade is incorporated in Liechtenstein, which is part of the European Economic Area and also has bilateral agreements with Switzerland which gives us a strategic edge. This means that we fall under European legislation, such as MiFID II, which gives us the ability to offer services across the whole of Europe – including Switzerland, as Liechtenstein has special deals with the nation. More importantly, the government and regulators in Liechtenstein are very open and friendly towards the use of blockchain technology in financial services. New laws will enable regulated investment firms, funds, and banks to invest into crypto assets – but these assets must be traded with regulated trading venues.
The laws in Lichtenstein defines tokens just as containers or wrappers – if you tokenize a stock, regulation that governs equity markets apply. By being MiFID II compliant and taking the opportunity of this new law, Blocktrade will be the first regulated trading venue to offer to trade with security tokens and other tokenized assets including ETFs.
Although both Malta and Gibraltar look attractive for blockchain businesses on the surface, their approach is a bit different. New legislation proposed in Malta creates a parallel financial system, which means that if you want to be an exchange that lists both financial instruments and crypto assets, you would need two separate licenses – one under MiFID II and the other under the new law. Gibraltar has accepted an interesting DLT law, but it falls short if your target customers are financial institutions since they can’t trade on an exchange that is not regulated with MiFID/MiFIR.
AM: Why are you applying for the MiFID II?
LG: We believe that blockchain technology can disrupt capital markets both on the primary – fundraising – and secondary – trading – markets. Although existing systems and regulations envision many different intermediaries, blockchain can eliminate some of them and by doing so lower the cost and increase the efficiency of markets. By using the technology in such a way that we persuade regulators, traders, and all other market participants, we believe we will make the largest impact – which is why we are doing this the hard way by applying for the license to operate a multilateral trading facility.
AM: How is Blocktrade different from say Bitfinex or Coinbase?
LG: Our focus is to be a central place in the security token ecosystem by partnering up with primary market solutions – such as Securitize, Polymath, Own, Neufund, etc – and being a low-risk and compliant counterparty to financial institutions that are moving into crypto trading. This means that we are focused not only on compliance with KYC and AML rules, like Coinbase and Bitfinex are, but also on all other rules and legislation that govern capital markets in Europe. We provide equal access and equal trading rules to all members, full transparency, compliant transaction reporting standard, and are implementing all Regulatory Technical Standards under MiFID II. This will enable us in the listing of security tokens (both equity and debt instruments, including funds).
AM: Are you planning on launching any new features in the coming months? If so, can you tell us a little bit about them?
LG: We just launched the exchange in October and registration is open for retail traders, but we have not stopped the development of additional features. As we want to make the trading experience smooth and fast, we are releasing native mobile apps in the coming weeks, adding simple diversification tools where you can get many different crypto assets in your portfolio with one click, and working on an ecosystem of algorithms which will be available to all members of Blocktrade.
On the institutional side, we are finalizing the Omega architecture, testing the settlement system, integrating compliance and reporting tools, and working on a white label solution for regulated brokers.
AM: Do you think Bitcoin – and the crypto market as a whole – is starting to bottom out and will recover soon, or do we still have a way to go before we see some good gains?
LG: The technology is developing rapidly and the adoption of cryptocurrencies is expanding across the world. Also, trading and investing in crypto assets is becoming more popular among institutional traders and investors. These are the supporting reasons for the bullish case on crypto markets, while there are also some reasons for the bearish case especially linked to the ICO market. It is hard to say where the market will move in the future, but we can be sure that the size of the crypto markets will grow and will be much larger a decade from now. A minor part of the future might be related to price increases, but tokenization of real assets will have a much larger influence on the markets as a whole.
Blocktrade is now live and users are trading digital assets at lightning speed. Exchanges like Blocktrade are helping the industry develop further and progress with its impressive innovation. We know our readers love the inside scoop, so we go the extra mile to bring you the freshest news and interviews with industry experts – so stay tuned to BitStarz News for your daily crypto fix!